tv Power Lunch CNBC March 28, 2016 1:00pm-3:01pm EDT
relationships. that was part of the problem, the vendors. they stumbled and had all kinds of issues. that's starting to go away in the short-term. might take longer. >> not a buyer yet? >> i don't think so. there are other places i would rather be. >> see you tomorrow. "power lunch" begins now. indeed it does, scott. thank you very much. welcome, everybody, to testimony stm. with michelle caruso-cabrera, i'm tyler mathisen. melissa lee and brian sullivan are off today. that means we get paid twice as much. >> that's right. >> absolutely. the markets have been on a tear since the so-called diamond bottom on february 11th. the dow industrials up more than 10% since jamie diamond of chase bought those 500,000 shares of jpmorgan stock. stocks basically flat now year to date, but there are many stocks that have lagged behind this rally. so are they due to play catch-up?
dom chu is here with perspective. >> i don't know is the bottom line. i do know i'm not getting paid twice as much anyway, so -- but let's look at this. if you look at the s&p 500, we screamed those member companies for stocks that have not participated in the rally but could be trending a little bit higher here. remember, these are all stocks that have been big down movers over the course of the past year plus. 500 s&p members, we looked at those ones within 10% of their recent lows, just hovering right around their recent lows, 52 week or otherwise, within 10% of their 50-day average price, just to give you an idea of trend, and still below their long-term average price trend line. again, still below the long-term trend, but going a little bit higher, maybe dead cat bounces, maybe not. but only 27 stocks in the s&p fit that bill here. among some of the highlights, most of them, the vast majority of those 27 are in the health care sector, whether or not it is pharmaceuticals or biotech, two bigger names here, pfizer and eli lilly came up on that
screen. maybe potentially a room for a bit of a bounce there. also financials, part of that picture as well. you see wells fargo and goldman sachs fit that criteria we showed you. and then also, a couple of names that aren't associated with financials or health care, micron technology, we know how bad it has been for the flash memorymakers. still, that fits the mold. also brown-forman, whiskey maker. if you look at the year to date picture for these, you know why health care and financials make up the bulk of those lists. on a year to date basis, those two sectors are the worst performers, financials in health care you see here down the most in the s&p 500. maybe some room to run. we'll see what happens. back over to you. >> we'll discuss that a little bit more. right now, dom, thank you very much. with our two guests, skip alesworth, and art hogan, chief market strategist with wonderlick securities. welcome to both of you. skip, you have a rather more
dour view of the markets potential from here. explain why. >> well, i think, you know, the european markets are in distress with all that is going on over there. and our market and i think the economies will be slowing in europe. and therefore international trade and so forth, our economy will just muddle along. but that may not be bad. i think there is still room for growth in the traditional conservative type investments, such as treasuries, utilities, bonds, et cetera. as money flows into our country, as a safe haven. >> maybe we turn to art and you see it in a different way. i think you have a view that there is more potential, no recession coming, and among the areas of the market that you don't like are the very utilities that skip does. >> you know, it is interesting, because skip and i agree on a lot of things, not the least of which is utilities. it is a place for safety. that's a place for safety that
has been a dividend play that has gotten very expensive. so when you think about the safety of a dividend play, you want to think about what multiple they're trading at now, and at what yield. you need to be more selective than that, so when you look historically, utility is trading at three multiple terms more expensive than they are historically. their yield is about a good 100 basis points lower than where it normally is. i think for dividend, you think health care stocks that dom just talked about, the companies that pay good dividends, or think about telecoms which have a reasonable multiple. that dividend darling, that quest for yield, that bond row place has gotten expensive. that's the only real place i disagree with skip in terms of where we're going this year. i do agree that money coming out of europe and money coming out of other international countries, where currencies are going down, is probably going to find its way to our shores. >> so, skip, if you had a really rough start to the year, think of the individual investor out there who thought they were going to lose a lot of money,
now back to even. some may be encouraged to think, you know what, i'm back to even, i'll call it quits for the year. do you think that's a good idea. you're not so positive on the market. should they go that far? >> i think it is very hard to call the specifics in the market exactly when to go out, when to go in, and so forth. i think being invested is a good thing. and being diversified. i think that's where utilities can have a play and a portfolio as offering diversification. art is correct, they are expensive. they had great runs. part of it is what they invest in. there is all sorts of different types of utilities, but those that are the basic local distribution companies for natural gas have done well. they're doing well this year, they pay 2% to 3%, sometimes 4% dividend yield. they had a history of growing that yield. and they look pretty attractive to the european rate environment. >> we have to leave it there.
skill alesworth, and art hogan. news aalert in the bond market, governments borrowing money for two years, rick santelli standing by, tracking the action with the results of the bond auction. what is your grade? >> the grade is c minus. charlie minus. i was probably generous, but it is a bit of a holiday setting. and we'll give it a little bit of an exemption here. let's go through the details. 26 billion two year notes, .877 was the yield at the dutch auction. you know, looks like 87 1/2 was trading. that didn't vary too badly. where we went off the rails on bid to cover, the amount of dollars available that are bid by customers for every dollar's worth of securities the government is selling, that was 2.58. the ten auction average is 3.13. but it has been trending down from the 3.25, 3.50, down to 2.80, 2.90. this is the lowest since
december of 2008. all the other stats are average to a little better. 47.4, indirect, that's ten auction average. 15.2, a little better on directs than ten auction average. dealers take 37.4. so the two year barely escapes. we have 88 billion in supply for the week. tomorrow we'll do five followed by seven year. >> c minus, i get it. not a lot of demand. the cboe index down 17% this year. we saw low volatility last weekend, even lower today. what is low volatility saying about this market? let's bring in cnbc contributor jeff kilburg of kkm financial. what does that mean, jeff? is it a good sign that volatility is low or oftentimes historically it means, boy, something is about to turn. >> it is a great point you bring up. i think it is caution. look at the environment in august.
we saw nine consecutive days of the realized volatility, which is expressed in the s&p 500 fluctuati fluctuations. the vix is really compressed, almost under 15 now, i think that brings out the fact complacency is here. if we see some type of move similar to august, this is the great opportunity to buy protection for portfolio, because at the end of the day, all the diversification we talked about, you need true negative correlation. vix futures, vix options, s&p futures and options. >> jim, are you worried about the big drop in volatilities. and if -- do you agree is it cheap? should you buy it here? how do you do it? >> nothing is a greater holiday to me where i figure out what jeff has missed and how i can correct it. within the put to call ratio, puts are actually still relatively expensive, historically to calls. the overall volatility has come down. the calls are cheap. this doesn't flash to me as a big warning of complacency. that being said, i'm still --
>> look at the premium. look at the premium right now in the vix futures. you go out to june, july, above 20. right now, you're right, the realized volatility rating under 10. that disparity, vix at 15, which represents implied volatility. it is huge premium. it is telling you something. >> not only i did look at it, i actually put a protective trade on today and didn't buy puts. i sold the underlying and got calls. i am still a bit worried about the market. mostly because we rallied 13 to 14% in a matter of weeks and it seems like the fed has gotten more bold in the last week and starts to talk about a tightening and we have known how that worked out the last two times. i'm worried about the market but not because of the volatility index. >> thank you. >> kilburg and i lamenting the losses of our basketball team. mine, virginia. his, the fighting irish. >> your bracket was busted? >> weeks ago. coming up, tracking terrorists online.
we're going to talk to the man who helps the government make connections between terrorist cells and facebook's oculus goes on sale today. will virtual reality be an expensive fad or will it disrupt entertainment as we know it? we'll bring you the latest. you're an at&t small business expert? sure am. my staff could use your help staying in touch with customers. at&t can help you stay connected. am i seeing double? no ma'am. our at&t 'buy one get one free' makes it easier for your staff to send appointment reminders to your customers... ...and share promotions on social media? you know it! now i'm seeing dollar signs. you should probably get your eyes checked. good one babe. optometry humor. right now get up to $650 in credits to help you switch to at&t.
from may 2008, just before the financial crisis. the stock is slightly off its intraday high, 31.59, the mark there today. still, exceeding the prior 52-week high there for that stock as well. the stock is up more than 25% over the course of the past year. 12 months. but still, guys, to put it in perspective, back in 2000, august of 2000, this was a $60 stock on the split adjusted basis. long way to go. >> i remember it very well. thanks, dom. remember everybody at cnbc, a lot of people owned ge. following a developing story in syria at this hour. syrian government forces and the russian air support announcing they have pushed most isis fighters out of the historic city of palmyra. russian video footage from inside the city showed empty streets badly damaged buildings. aerial footage released by russian television showing the state of palmyra's famous ruins. tough. these ruins once grew tens of thousands of visitors each year
before isis destroyed many of the 2,000-year-old monuments. the extent of the destruction remains unclear at this point. now to the big development out of brussels today, belgian authorities releasing a man they charged in connection do last week's deadly terror attack due to lack of evidence. belgian police initiating a new appeal to anyone who can help them identify the man seen in this security camera, the man wearing the hat seeing footage from the brussels airport moments before last week's terrorist attack. the only one wearing the white colored jacket. the death toll has risen to 35 people, excluding the threw men who blew themselves up. could brussels have been prestrepr prevented with better terrorist tracking and software. our next guest is on the pulse of the digital trail. mark is sap national security services president and ceo. good to have you here. >> thanks for having me, michelle. >> explain to me what product you have that helps governments in situations like this. what does it do?
>> we all create a pattern of life. and it used to be in the old days it was pretty analog. today, almost everything we do, whether interacting with the internet or walking through a city and being captured by camera or applying for a job is captured in some sort of digital form. and the challenge is how do we bring this all together and assimilate it and see how it might change in the case of the bad guys. >> you have a software product that does this? >> we do. >> how does it work? without revealing too many secrets? >> it is basically a very high speed database that has things like a graph engine, which allows an ability to connect people and places and things together and link them in a way that we might not be able to do in our heads. >> it sounds to me like software that does, when i watch homeland and i see carrie with the huge wall of photos and lines and all those things it is taking what is in her head in theory and doing it faster and more
accurately. >> and we want to build to repositories like this. we can't snap it all in there. we sell high speed in memory database called hana that does this. we're working with customers and governments and places -- >> who are your customers? >> i can't really talk about who specifically they are. but we work in the community, the national security community. and so with commercial and government agencies that are involved. >> beyond the united states. >> in some cases, yes. >> do you feel like -- or can you tell or maybe you know, has any of this kind of software been put to use in post paris and now belgium? >> absolutely. we can see in both these cases the data existed. we know -- digital footprints in both paris and brussels and san bernardino we should have been aware. these products are beginning n emerge in the space now. working with customers now to use them -- >> who within the government do you work with? what are you doing with them? i'm the government of belgium. you come to me. what do you do >> law enforcement type person or analyst looking at tracking
bad people, bad people have patterns, sometimes they're doing their norm things and sometimes new things happen. they might start money being pulled out of bank accounts, might be traveling and moving and concentrating in an area we can help them look at those things and through that, ultimately, maybe prevent some things like this. >> within this country, there is talk of, when we go through a toll, can the government see every time i go through a toll and people get nervous about their privacy. is that the kind of data you can help -- >> that could be brought in. these are policy issues to what can be brought in, but, yes, if somebody is tracking a bad guy, and they know license plates, potentially license plates, cars, they can track them like that. digital and facial recognition, cameras all over cities now, drones at times that have cameras. many different ways that data can be collected. >> every single government has to decide and the people of that country presumably they live in a democracy, if we assume that. have to decide what is the
trade-off or where does -- where do you take the trade-off to do offset my privacy, when i go through a toll, walking down the street, my facial recognition versus keeping me safe? >> you're correct. these things have been applied for a while. think about credit cards. there is a good example of user behavior or pattern. when you have a credit card, i'm sure you had one that has been compromised, the credit card compies are adept at knowing when your pattern has changed. somebody is buying things at different places, in different kinds of things, so what we're doing here is taking a segment like that and expanding it to various other parts of life and assembling this all together. we think this will allow analysts and some of the agencies agree to not do everything in their head. pulling data from different places and using intuition. you mentioned carrie from homeland. bring that into an online environment where it could be helpful. >> how expensive is it? >> not expensive at all. it is, you know, we price this very competitively in market and we're not the only ones that can do it. these are emerging technologies.
over the next five years, you'll see this major impact and how we do this business. >> thank you for cing in. appreciate it. mark testoni. speaking of technology, facebook apologizing today after sending safety check messages to users on sunday asking if they were affected by the easter bombing in lahore, pakistan. the problem, the alert was sent to users all over the world, including in the united states and the united kingdom. in addition, notifications sent through the facebook app specified that the blast was in pakistan, but the alert sent via text message did not asking only are you affected by the explosion? let's bring in julia boorstin, they apologized for this, right? >> facebook did apologize. they said it was a bug that caused this. i know a number of people received this text. i did not myself. you can imagine, michelle, how this would make people really worried, wondering where the explosion was, if their friends and family nearby were safe. facebook said that this was a bug and they are determined to
fix this. but this product safety check really has had a lot of positive impact since it was launched. we saw it used in belgium with the recent attacks there, as well as the attacks in paris. and it was really designed for specifically natural disasters. so we have seen it rolled out about half a dozen times over the past year or so for natural disasters. >> so it was rolled out in the wake of -- in the wake of paris or is this just something they had come up with and had they seen a problem like this in the past? >> they never had seen a problem like this in the past. in fact, the criticism of facebook in the past has been for not rolling it out more frequently. it was actually designed in the wake of the earthquake and tsunami in japan. they said, let's figure out -- people are using facebook to alert friends and family they're okay. let's figure out how to have a specific tool to make it even easier to do that. so they rolled it out, i believe, in 2014. and since then they have been using it mostly for natural disasters. the paris attack, i believe, was the first major time it was used
for a terrorist attack. and we have seen it used for a couple of terrorist attacks since then. so facebook is trying to figure out when is the right time to do it. you don't want to have this tool out there every time there is a bombing that may be affecting just a tiny little area. you want to make sure it is only rolled out when it would affect enough people that it could be useful. >> got it. julia boorstin, thanks so much. what is a bigger risk, investing in too many companies or too few? we'll debate that when "power lunch" returns in two minutes. e. but at t. rowe price, we can help guide your investments through good times and bad. for over 75 years, our clients have relied on us to bring our best thinking to their investments so in a variety of market conditions... you can feel confident... ...in our experience. call a t. rowe price retirement specialist or your advisor ...to see how we can help make the most of your retirement savings. t. rowe price. invest with confidence.
i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my options. then i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest iup to you. call now and find out about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, it helps pick up some of what medicare doesn't pay. and could save you in out-of-pocket medical costs. to me, relationships matter. i've been with my doctor for 12 years. now i know i'll be able to stick with him. [ male announcer ] with these types of plans, you'll be able to visit any doctor or hospital that accepts medicare patients. plus, there are no networks, and virtually no referrals needed.
so don't wait. call now and request this free decision guide to help you better understand medicare... and which aarp medicare supplement plan might be best for you. there's a wide range to choose from. we love to travel - and there's so much more to see. so we found a plan that can travel with us. anywhere in the country. [ male announcer ] join the millions of people who have already enrolled in the only medicare supplement insurance plans endorsed by aarp, an organization serving the needs of people 50 and over for generations. remember, all medicare supplement insurance plans help cover what medicare doesn't pay. and could save you in out-of-pocket medical costs. call now to request your free decision guide. and learn more about the kinds of plans that will be here for you now - and down the road. i have a lifetime of experience. so i know how important that is.
welcome back to "lunch." let's get to the bond market and rick santelli at the cme. hi, rick. >> hi, tyler. two year note auction wasn't much below average, but it was below average nonetheless. and if you look at intraday chart, you you can see the drift there. but no big action around 1:00 eastern. if you go down the curve a little bit, or you consider the bigger picture, month to date of two years. drifting to the lower end of range, not acting like an imminent tightening. the 30 year did actually extend. it is now in the low yields of the day. and finally let's look at february 1st start of the dollar index. it is down about a quarter of a cent right now. but you can see there is some important bottoms on the left side around the 11th of february and 95 1/2. the current big spike of recently 94.75.
not that far away. tyler, michelle, back to you. >> thank you very much. let's transition now to look at gold prices, which are closing right about now. there it is. there. there is gold. right there. pardon my back, ladies and gentlemen. let me turn around. down 2.20 at 1219.40. let's look at other medals, minor moves for silver, copper, palladium and platinum. i suppose copper, the biggest one, on the upside, by about half a percent. palladium moving down by similar half percent or so. >> got it. tyler. facebook's oculus rift is in stores today. it has 30 gain. weird thing you got to wear on your face. is virtual reality text's next frontier? straight ahead here on "power lunch." ♪ every auto insurance policy has a number.
but not every insurance company understands the life behind it. ♪ those who have served our nation have earned the very best service in return. ♪ usaa. we know what it means to serve. get an auto insurance quote and see why 92% of our members plan to stay for life. the first stock index ♪ (musiwas createdoughout) over 100 years ago as a benchmark for average.
yet many people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? it's time to bench the benchmarks. great time for a shiny floor wax, no? not if you just put the finishing touches on your latest masterpiece.
timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. hi, everyone. i'm sue herera. here is your cnbc news update for this hour. former cuban president fidel castro blasting president obama
after his historic trip to cuba last week. he published a scathing letter titled brother obama, recounting the history of u.s. aggression against cuba in his opinion. and said cuba doesn't need any gifts from the empire. dutch police who made an arrest found ammunition at a house they searched. police who carried out those raids seized the ammunition, money and drugs from the home. some sprint customers had trouble with their phones. the company was struck by apparent network issues. sprint is ware of the issue, it says, and has been responding to customers through its twitter account. and the president and the first lady hosting their last white house easter egg roll for thousands of kids. as per tradition, they read where the wild things are to the children and the president chatted that later with nba great shaquille o'neal on the
white house basketball court. that's the cnbc news update at this hour. back to you, michelle. thank you very much, sue. how much should you really diversify your portfolio? it is a big question that many are asking after valeant's huge fall. you heard about bill ackman. it comes down to this, diversify with too many stocks, it is hard to beat the s&p. hold a few stocks and leave yourself open to overexposure and a big fall. let's bring in bob pisani and mike santoli to discuss the question. i think on the one hand, if the person is really good, they get a big hit. you get a big, big pot. but if they get it wrong, it is just bad on the downside. >> you're inviting more risk while also ramping up your ability to do better than the index. i think there is a way to split the difference here. sequoia found was 32% concentrated in valeant at the top last summer. pretty safe to say, long-term
mutual fund money. that's a little too much, too concentrated in one individual name. but if you're not going to do an index fund, not going to do passively by the market for low fees, then if you want to actually attempt to be active, and to beat the indexes, you have to be a little more concentrated than -- not a few hundred stocks. a lot of the research says more like a couple, few dozen stocks is as high as you should try. >> you're nodding your head. >> the one thing i would agree in, guys who say they're stock pickers and own 100 stocks, they're not stock pickers, they're closet index guys. you're right on that. the problem with the whole concentrated portfolio game is, what is the point? the point is maybe you're going to get a home run because you get brilliant stock picker. it really causes so much concentration that the risks are much higher. i think there is a real correlation there between the risks you're taking, the ability of the asset manager to outperform. my experience is if you do this, fine, but make it as part of a standard portfolio, where you
got 80 or 90% indexes. you got your risks spread out a little bit more. i still don't think there is any strong evidence that anybody should be putting a lot of money in concentrated bets. >> you as an investor should be diversified. the individual pieces of your diversified portfolio, you can have some of them shooting to do -- >> in other words, you have a bunch of investments and maybe one of them, and you decide the percentage, is in an ackman style investment. and in a sequoia style investment, where you ride that particular trade. but then again, back to the original point, if it is a smart part of your portfolio, what is your point? >> this is where it becomes a high maintenance activity here. you to keep an eye on all of the different funds, some very concentrated. make sure none of them have too much overlap. make sure they're not individually taking too much risk. it is not an easy trade.
>> risks are too high. evidence of outperformance by the small group of people who have concentrated funds, i don't think it is particularly there overall. so i -- there is a little bit of a contradiction in what we say about having a small concentration. i just don't think it is worth it. we have been debating this for 25 years, at cnbc. 25. that's how far this old debate goes back. i still don't see the evidence, why anyone would put a substantial mark of their portfolio in concentrated funds. >> thanks, bob. thanks, mike. tyler? >> let's bring in a couple of guys who know a thing or two about averaging money. welcome. want to get your reaction to what you just heard there, chris, how many stocks in a portfolio feels optimal to you so it is not too few running the risk you've got too much exposure to any one company and not too many, so you run the risk of becoming basically an
index. >> that's a great question. in our portfolios, we run about a 50 stock portfolio. about 2% holdings on average. but you need to start there because what will happen is you will have growth of those stocks and if you want to let them run, and you don't want to realize the capital gains, they're going to get to be a larger percentage of portfolio. at regent atlantic, we cap out at 5%, the max we want to see in any one position. >> so if a stock gets up to 5%, either because you've been adding to it or it is just expanding, you start to trim it. how about you? >> they often say in this industry that you build wealth from concentration, you preserve wealth through diversification. you need to look at the individual investors, risk tolerance level regardless of where they are at their stage of their investing life. for example, smart trust, we have a portfolio, yield-based portfolio that is equally allocated across 20 different names. however, we diversify across u.s. large cap, u.s. midcap,
u. u.s. small cap and international as well. you can get some diversification within a more concentrated portfolio. >> remember when peter lynch was managing magellan, he had 900 stocks in the fund. vinik had 400 or thereabouts. did you ever do something like that? >> it goes back to this traditional active versus passive debate. what is the right number? you see this active share concept now they're calculating and showing for different managers. i think it comes down to what the objective of the portfolio is, to provide a high level sustainable income, to provide long-term growth, what that actual mix is depends on that particular manager and that investor has to marry their risk april tidpetit appetite. >> you like a couple of sort of, chris, some interesting choices here. dividend payers, intel, ford and spectra energy. >> i like bargains. i'm the value guy. so i like stuff they're selling at bargains. if you look at ford, it is selling at a great bargain. >> 7 pe.
>> 4% dividend yield, average car on the road is 12 years old in america. so at some point these are going to have to be replaced. with oil where it is, what does ford do really well? they build big cars and trucks. suvs and pickup trucks, and i just think that -- >> why intel? intel has been calm. hasn't it? >> it has. i think we have had -- we have seen this huge surge over the tablets. i think we're going to start moving the other way, we're going to start seeing some more pc sales, we're going to see some more higher end computing sales, especially as virtual reality starts to take over. and that just translates to a better business for intel. that's where they own the market. >> quick thought on a couple of sectors you like before we go. >> i like energy now. i think if you look -- >> it is so beaten down. >> alternative sources of energy, like natural gas. i think natural gas is priced very attractively right now and long-term needs for natural gas across the globe, given this cleaner burning fossil fuel initiative and reits. i like reits, and low rising interest yield environment.
look at 2004 to 2006, return of 24.5%. pending home sales up earlier today. there is opportunities in the market. >> gentlemen, thank you very much. chris cordero. you can go to powerlunch.cnbc.com right now to see suggestions on what to look for in the fixed income space. that's powerlunch.cnbc.com. over to dominic chu for a market flash. >> tyler, want you to finish line shares nearing the best levels of the day, up by 13%. analysts at bbt raising their stock rating to a buy from a prior hold. the firm noting a stronger than expected fourth quarter and conservative full year guidance mark is the reason behind the move here. the stock gained about 19% year to date. still, though, michelle, down 8% over the past 12 months. back over to you. a developing story at this hour, financial services provide fectional has been arrested charged with wire fraud and securities fraud. prosecutors say andrew casperson
who worked for park hill group was involved in a plan to scam investors out of $95 million. kayla has more. >> the charges were just unveiled this morning by the southern district of new york, who says that andrew casperson, 39, a former partner at the park hill group, previously owned by blackstone before being spun out as pjt partners had sought to defraud investors of up to $95 million, specifically some $25 million from a charitable foundation had been diverted into a fund that casperson, prosecutors say, was using for his personal benefit. as of last week, prosecutors say the balance in that account was just $40,000, despite the fact that casperson was allegedly seeking an additional $20 million from the foundation and $50 million from what the charges call a multinational private equity firm. now, they say this operation took place between last july and
this month, march of 2016. that spans the time when park hill was owned by blackstone, before being finally spun out in october as pjt partners. both firms are involved in this investigation and pjt says that when it uncovered this improper fraudulent behavior it notified authorities and also launched an internal investigation that is currently being led by law firm paul weiss. pjt in a statement in part says, since the inception of our firm, an unconditional principle of integrity has been a core value as we build a lasting franchise. our commitment to clients begins and ends with honesty, and transparency and strict adherence to these values is the absolute cornerstone of our firm. blackstone also said it is shocked by this fraudulent behavior and that it too will cooperate with authorities as they continue to investigate. we are expecting andrew casperson himself to appear before a magistrate judge today here in lower manhattan. and we'll have that news for you
as soon as we get it. michelle, back to you. >> kayla, we'll be watching. people should know pjt partners down more than 14%, decline of $3.85 to 22.62 for the firm where this man was arrested from pjt partners, lower by 14.5%. coming up, cnbc exclusive, uber's ceo tells us when he plans to take the company public. we'll tell you right after this break. estment management, we believe in the power of active management. we actively manage with expertise and conviction. so you can invest with more certainty. mfs. that's the power of active management.
welcome back to "power lunch." egg producer cal main foods reporting a third quarter profit of 1.33 per share. 99 cents above estimates. cal-maine shares up 9% now. avon naming kathy ross to its board. the move comes as avon tries to avoid a proxy fight with activist investors. shares of avp up more than 6% right now. almost 7%. and investors are feasting on a bunch of food and drink stocks
in today's session. mccormick, jm smucker, molson coors, hitting all time highs. uber showing exponential year over year growth. all wall street wants to know is when is uber going public? jeff cutmore sat down with travis calnick in an cnbc exclusive interview and asked him that question. >> we're not in need of public capital, if that makes sense. but there also of course is that sort of -- i call it the moral obligation with investors who put money in. they need to see liquidity. and we have employees as well who, you know, put in a lot of blood and sweat and tears and to make uber successful and they own equity. and so we have to ultimately find liquidity for all shareholders, but i'm going to make sure it happens as late as
possible. >> he sounds like a man who doesn't really want to go public. >> he does not want to go public. >> i couldn't blame him. i could not blame him. >> it is -- you have to answer quarterly as we know. we hear the complaints from the ceos about how tough it is to meet the numbers every quarter. that being said, you hear from companies that did go public, were forced to go public, and they say it made them more efficient, much more quickly. forced them to make tough decisions -- >> the discipline of having to meet the quarterly numbers and meet with analysts every time. time will tell what they do. it is the -- it is the big kahuna in the room. let's move from maybe the next big ipo to what may be the next big thing in tech. two years after purchasing oculus, facebook is launching the rift headset. and it is a great look, ladies and gentlemen. julia boorstin joins us with the look. >> facebook's $600 oculus rift is the first of the headsets to go on sale.
the rift which launches with 30 games, thousands of 360 videos and 200,000 immersive photos and other vr experiences. oculus created this far lands virtual world to showcase some of the creative possibilities. the total market for augmented and virtual reality is projected to reach $150 billion by 2020. it is according to digit capital. that's why this is sure to be so crowded. htc launches the viv headset. in october , sony playstation vr launches. there has been some debate about how quickly vr will be adopted. all three vr platforms are expected to sell out, but several analysts warn that prices need to come down and issues like motion sickness will need to be addressed before vr becomes truly mainstream.
>> i'm not a big gamer, julia, or michelle, but i suppose most of the time i'm proved wrong here and these things have a life of their own and they take off. >> well, you know, tyler, i'm not a big gamer myself, but the demos i've done have been absolutely mind boggling. it is a very hard format to explain or describe, but you really feel like you're in another world. you try it out, especially these high end headsets, like the rift, or the viv, you can imagine how this could be used for storytelling, hollywood studios all investing and trying to figure out the next generation of storytelling. or even journalism or things like architecture. you feel like you're in another physical space. so the potential for everything from training surgeons to do surgery to envisioning what it would be like to be in a war zone is pretty amazing. >> i can't wait to try it. i'm thinking about buying it, my only thing is 600 bucks and it is the first product, usually
should wait an iteration or two. >> i think this version is not -- this version is probably not designed for anyone who is not a gamer. but there will be plenty of versions down the line and for instance, apple just got a patent to do a headset, which would be working with an iphone. there will be lots of different veries y versions of this. >> you see it in training applications as you say, teaching a pilot or a fighter, a navy s.e.a.l. what to do or in surgical or other applications. thanks, julia. starwood hotels living up to its ticker symbol hot. what is driving this stock higher when we return.
timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. starwood hotels up by 2% today. anbang rising the offer. simon hobbs has an update. >> this is the second all cash offer from the chinese starwood to beat an agreed cash and stock takeover by marriott. the board still has to recommend it as a superior offer.
if they sign off, analysts are divided if marriott will counter with a higher bid. but importantly marriott is hitting back, questioning in an unusually strong statement whether the anbang led consortium will be able to close the deal, whether it has $14 billion of financing in place, plus the time it would take the chinese to gain regulatory approval. in new york, anbang received an all clear to buy the waldorf astoria for $2 billion. though the president no longer stays there. the question is whether the committee on foreign investment might object to the chinese taking over hotels that are owned by starwood, that are close to military and other sensitive government locations. that proximity argument has already killed 3-d and tech. in this case, any hotels in question could easily be sold. it would only delay the deal. bigger question might be whether china's insurance regulator would allow anbang to further invest overseas after reported
locally that would breach a 15% red line. in the meantime, guys, the uncertainty plays into the hands of marriott or so it hopes. >> certainly. all right. super interesting story now. thanks so much, simon. stock buybacks, good for short-term boost in the stock, are they bad for the company in the long-term? we're going to break down the numbers with some big data analysis. "power lunch" is back in two minutes. wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. td ameritrade. hi...i'm pamela yellen. you may have read my bestselling book "the bank on yourself revolution". over the last 25 years,
i've researched more than 450 financial products. i found that one of the best-kept secrets to help you plan for your retirement is the home equity conversion mortgage. it's a line of credit for homeowners age 62 or older. and it's offered by a company you can trust one reverse mortgage, a quicken loans company! no monthly mortgage payments are required and the money available to you increases every year. for example, if your 100,000 dollar line of credit remains untouched, it could increase to 300,000 or more, years later. and i recommend that every homeowner who qualifies consider getting one now. call one reverse mortgage now to get the details! [ that's a good thing, eligible for medicare? but it doesn't cover everything. only about 80% of your part b medical expenses.
the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, they could save you in out-of-pocket medical costs. call today to request a free decision guide. with these types of plans, you'll be able to visit any doctor or hospital that accepts medicare patients... plus, there are no networks, and virtually no referrals needed. join the millions who have already enrolled in the only medicare supplement insurance plans endorsed by aarp... and provided by unitedhealthcare insurance company, which has over 30 years of experience behind it. with all the good years ahead, look for the experience and commitment to go the distance with you. call now to request your free decision guide.
stock buybacks with produce a bounce in the price of the stock in the short-term. are they good for long-term growth. eric chemi has the numbers. big data dive. >> big data dive. we looked at the s&p 1500. you look at all the companies and you look at the performance of them overall, the companies that don't have any buybacks, they do fantastic in the long run. the companies with buybacks, the company that had the most buybacks, they do terribly in the long run. just that simple. and the first couple of years, though, they look the same. the buybacks can help juice returns. but after that two years is up and they don't have the cash to invest, don't have the cash to spend, you really see this big
difference. so if you try to have an interesting portfolio, the first step you can do is get rid of the companies that do buybacks. >> so you do -- data analysis, any fundamental explanation we know of or -- >> that's how we have gotten -- >> don't move. >> before he gives the real answers, couple of basic analysis points, companies know we don't have a better use for this money and what you'll see is that return on assets, they go down over 20% in the year following an increase in buybacks. >> that's very interesting. let's bring in david nelson, you knew he was here, chief strategist. based on what he said, what does this mean for investors? should i not invest in companies? >> eric is hitting on an important point. it is understandable why ceo would take the easy way out. because it is -- look, the fed is complicit in this by keeping interest rates low, you can issue debt, prop up near term earnings. in the end, you examine this, it is really a veiled attempt to
really hit stock based compensation targets. why invest in the company in the future right now because in the end, this is going to cost r&d, hit capex. >> also risky. >> well, yeah. they try to pass it off as they're on the same side as the investor, but it can cause risk taking. by doing that, you're selling the future of the company. you'll hit a wall. companies like ibm are the poster child of this type of operation. >> i don't know if you saw gretchen morgan son wrote a piece in the new york times, i call her angry gretchen, she's always angry about something, she was angry about buybacks. >> and she should be. >> the point she makes is when you buy back the stock, you get the one time bounce, but if you had invested the money properly, you get returning revenue and gains in theory from -- >> they have been buying back about $13 billion every year like clock work. starting to slow that down, they hit a wall. what has it really gotten them? revenue growth, nothing. in the end, think of what a
buyback is. you're doing nothing to the long-term health of a company, you're quitting. you're not going to boost revenue. you will not boost earnings. all you've done is change the share count to prop up that -- >> i was going to say, say it doesn't boost earnings, but as an individual shareholder, you look at -- if the shareholder base gets smaller, the earnings ascribed to your share -- >> whose stock do you think they're buying back? they're buying the ceo stock and the executive committee who are selling their stock. >> i'm trying to explain what the rational is, why some people like them. the pe does look better. >> look in the future, you'll hit a wall. short-term it works. long-term it is a death warrant. >> buybacks have been huge over the last couple of years. at rates we haven't seen in a very long time. does that tell me the market is overvalued and we're about to hit a -- >> the peak in buybacks over the last ten years was at the top of the market in 2007. the trough in the buybacks was the bottom of the market in
2009. corporate managers are the worst market timers when it comes to the buybacks. it is suggestive of a top. >> they always suggest they're buying back stock on the cheap. look at cisco, case in point. >> so the bigger message is when we all point to the jamie diamond bottom, february 11th, why is it different? >> very different. he went out with cold, hard, personal cash, wasn't the company buying the stock. he bought the stock. that's the kind of thing i want to see. >> got it. all right, guys. eric, david, thanks so much. >> interesting conversation. we begin the second hour of power with a look at the biggest gainer in the markets today. pharmaceuticals soaring more than 50% as its drug to prevent migraines had success in trials. meg terrell joins us with more. >> this is a problem a lot of people are familiar with. millions of americans suffer from migraines. they're looking at severe migraines, 11 million to 14
million people are the estimates in the u.s. who had severe migraines. they're putting out results of a midstage study showing the drug reduced migraines by 75% a month in more than a third of patients in this trial. that compares with 20% reporting that level of reduction who are taking placebo. that's a significant increase for this drug. with the number of patients in the u.s. with severe migraines, they estimate it could be $5 billion to $6 billion a year. alder is not alone. other folks competing here include teva, eli lilly and amgen and all have drugs in the later stages of development. this is neck and neck. there are some differences in who is furthest along and which drugs look potentially better. one thing to note is they are all given by injection or iv infusion and so one thing with alder is maybe they can dose that just once every three
months versus perhaps once a month for competitors and maybe that's something to differentiate themselves with. positive news here for alder. few more years until we know if these can hit the market. >> i take migraine medicine. i take it when i have a migraine. this is almost permanent medication. >> chronic therapy. this is for folks with really severe chronic migraine, they count it as eight mai graigrain more. it is a severe problem. >> how much would it cost? do we know? >> i was talking with ronnie at bernstein about this, he said because there could be so much competition, that will bring costs down. he's talking about $10,000 per patient per year. >> that's a low cost price. >> that's a low cost price. >> right. >> all right, folks. thanks very much. now to a big story getting national attention. georgia's governor nathan deal promising to veto a controversial bill that critics
say would have allowed organizations and business owners to deny certain services if doing so violated their religious beliefs. earlier governor deal explained why he's against the bill. >> they are simply trying to make life better for themselves, their families, and their communities. that is the character of georgia. i intend to do my part to keep it that way. for that reason, i will veto house bill 757. >> let's bring in jonathan love its, vice president of external affairs for the national gay and lesbian chamber of commerce and hope to be joined by joshua mcewan. he was a supporter of the bill. welcome, good to have you with us. you must be pleased that the governor announced his intention to veto this bill. why is it so important for you
that he do that? >> well, we certainly applaud governor deal in this. this is -- he saw what the market has always seen, that equality is good for business. that such state sanctioned discrimination like this will cause a massive bottom line shock for the state of georgia. look at the corporations who came out in support of this, everyone from coca-cola to the nfl to marriott to american airlines, both here and recently with north carolina, you name it, they were out against it because they know that the best thing you can do for a bottom line is have the most inclusive workplace and supply chain for all lgbt and allied citizens of your state. >> we have seen legislative efforts like this one in indiana, arizona, last week in north carolina. let me ask you as a point of policy, for individuals who sincerely have religious beliefs, who believe that conducting business with people
from the lgbt community is against their beliefs, what do you counsel them to do? >> i counsel them to realize that there will always be a separation for personal belief and what is necessary to conduct business. now, especially if you are someone as this bill would allow on the public payroll to exercise any kind of discrimination against the community, that's not allowed. there are lgbt georgians and north carolinians and other whose salary is being paid by their dollars. and you don't get to use that. >> could a catholic priest be sued for not conducting a gay marriage? >> what they do in the privacy of their churches and in their private facilities like that, that is entirely their business. we're talking about making sure that the marketplace and public accommodations are open and equal to all. and it is a bottom line business first case. we know when you let people be themselves, marry, identify, however they want to -- that their productivity goes through the roof. it is the best bottom line case for the corporations involved and for the state government. >> georgia senator joshua mcewan
joins us. he has been a supporter of the bill. welcome, sir, we're glad to have you with us. i hope you were able to hear jonathan's answer there to my question, which was how would you counsel private business people who have sincere religious beliefs about serving people in the lgbt community, how would you counsel them to conduct themselves, absent a law that would enable them to, i guess, decline to render services? what do you say, senator? >> well, i think what is important with what we did here in georgia is the final bill that we sent to the governor did not apply to business. it was restricted to pastors, houses of worship, religious schools and religious nonprofits. and so we tried to avoid the whole controversy about refusal of service from -- for profit businesses and that's why i was surprised the governor vetoed the bill today because of the
level of compromise we engaged in to get a bill to his desk. >> so, jonathan, how do you answer the senator's comment there that really -- that this particular bill didn't affect -- would not have affected businesses including some that had threatened to boycott georgia, but really only applied to pastors offering religious services, religious-based nonprofits and the like. >> we have seen this before. i imagine we'll see this again. it starts there and accelerates to discrimination in all forms of economic service, public and private sector. so what we want to -- what we hope to see now is governor deal call his good friend governor mccory in north carolina and walk this back and make sure they see the same business case that our corporate business partners make that it is damaging for business to have this kind of open ended policy that could spiral out of control and allow discrimination against everyone. >> even though it is only limited to religious institutions?
>> in this one instance. but we have seen much more stringent bills across the country. >> not this one. >> not this one, in this particular instance. there have been multiple versions that were edited before it got to the governor's desk and who knows where it could go had it been passed. >> so, senator, how would you feel if a new bill were brought that extended some of the, quote, religious belief protections to business owners? would you favor that kind of legislation as you favored the one that was -- that was in front of the house, that you say pertained to only to pastors and religious-based nonprofits? >> well, i certainly don't think people stop being a person of faith because they walk out of their door in the morning and go to the office. but the point is, the governor vetoed a bill that is much more narrowly tailored. question that needs to be answered is, are we really saying that religious schools can't make decisions on employment to reinforce the
teachings of the religious institution that is sponsoring the school? are we saying that a church or a house of worship can't make employment decisions that reinforce the teachings of that church or house of worship, are we saying religious nonprofits have to fundamentally violate their own religious teachings to be able to continue their ministry. these are the hard questions that frankly the minority party in the debate couldn't answer. and i really continue to be at a loss as to why the governor wouldn't sign a bill with these very narrow protections that simply dealt with direct providers of religious services. >> lots of questions there, good questions, i think, jonathan. how do you answer the senator on that? >> i would say, senator, you have to be aware by now you have lgbt constituents now living in your district. whether they are business owners or consumers or attendees and congrega congregants, they're part of the cohesive fabric of your community and discrimination against one in any sector is
discrimination against all in all sectors and are you willing to tell lgbt business owners that the jobs they create and businesses they innovate and gdp they add to the state of georgia is less than their straight compatriots in the state? i don't think you are. i don't think that's the case of any business or institution would allow you to make. >> -- allow one side of this debate to aggregate the power of government to punish religious beliefs they don't like. we have over two century history in this country of being able to have a pluralistic religious culture where people of various faiths can live and let live. we're seeing a dangerous trend of people trying to aggregate the power of government to punish people that have religious beliefs that they don't agree with. and that's an incredibly dangerous trend, something we need to arrest, that's what we're trying to do with house bill 757. i'm sure we'll continue to try to do it in the wake of the governor's veto. that's a responsible public policy. i think most people agree with
that regardless of their walk of life. they want all faiths to be respected. they want all faiths to be treated equally by the government, they don't want the government putting its thumb on the scale and saying, well, if you have religious beliefs that fall in column b, we'll tax you, revoke the accreditation of your school, we're going to revoke your license for your profess n professional work to do your job. nobody wants to see us go down that road. >> we have to leave it there. i'm sure this will be a topic we have come back to in future times. appreciate it. >> so is the american real estate market about to get a reality check? especially on the high end? we'll check on three big cities in different parts of the country where the markets have been percolating. that's coming up on "power lunch."
new report saying pending home sales going to a seven-month high for february. what are the mixed signs telling us about the housing market? ron insana is out with a new piece on cnbc.com saying we hit a top in the new york real estate market and could have bigger implications for the entire country. let's bring in agents from across the nation in addition to ron. new york, austin hoffman with douglas elman. miami, sam dibinak. in los angeles, erin kirkman.
ron, i'll start with you. you have this piece where you suggest new york city, a lot of signs in new york city anecdotally are telling you the market is at a top. >> 70 cranes, 5,330 luxury apartments going up. some of the tallest residential towers in new york going up or already up, undersold. starting to see deep discounting, starting it see a host of things, associated with tops in hot markets, average price of 432 park, the tallest residential power in western hemisphere. $21 millions among the places sold. foreign money is leaving the u.s. >> to underline this, in your piece, you point out historically you can go back to the 20s, every time you get to the tallest building in the western hemisphere, what is it telling you? >> or anywhere for that matter. shanghai, dubai. it is associated with the market top. we reach for the stars, as they
say on wall street, trees don't grow to the sky. and to me this seems like we're going to have a dangerous oversupply against tumbling demand from overseas buyers. >> austin hoffman, you're the real estate agent for here in new york. speak for your city. is it that bad? >> well, right now, under 3 million and we're seeing anything under 3 million we're seeing go right off the market. we put it up. it sold and closed in a matter of, you know, matter of weeks there. but i do believe that we're about to hit a peak and it is going to burst pretty soon. >> why? >> i just think the interest rates are extremely low right now. they're a lot lower than we have seen in a long time. and it is actually pushing a lot of people to buy right now. but i believe that, you know, soon all the new constructions and everything is just going to come to a halt. i think we're still seeing new construction and everything from few years back and eventually i think it is due to burst, the
bubble. >> it sounds like you think the high end is slowing in new york. you said specifically under 3 million. and new york city is such a weird place. >> that's the lower end. the high end is slowing down. we're seeing a lot of price productions with high end -- anything above 4 million. we're seeing a lot of price production and not moving as fast. but, yes, the lower end of the market now is as spring has come, still holding on. >> 3 million is the low end of the market in new york. it is painful. sam, how is it looking in florida, particularly in miami? >> particularly in south florida and miami, prices have gone up in miami from 9% year over year, 11% in broward year over year, and wages have only increased about 3% to 4%. what is that saying? it is saying that prices are increasing, but people aren't able to spend as much because they're not making as much.
they're not able to catch up in this market. so what is somebody supposed to do. they can buy because rates are still very, very low, under 4% for 30-year fixed. if they're going to live in that home, they're going to love that home and not leave the home anytime soon because it is not a market to be flipping. it is a market to stay in that property for a while and because prices are so high, a lot of people are also renting. so if you are an investor, it is a great market it buy and rent it out because you can find those cash on cash returns for sometimes as much as 10%. >> sam, but what about people who are not -- who are coming out of there buying a second property, the money is -- maybe from overseas or maybe from new york or chicago or cleveland or st. louis. i'm guessing that they are less dependent on income growth to fund that purchase than the ordinary person in another kind
of city. >> correct. and, again, money is still so cheap right now. so if it is that second purchase, second home buyer, there is a lot of great inventory. i know we're talking about l.a. and new york. but i have a place that is under 2 million, three bedroom with ocean views and skyline views and the heart of ft. lauderdale and it is under 2 million. >> don't tell anybody else. okay. >> erin, what is the high end like in l.a.? what is the high end, erin, in l.a.? how do you define it? 3 million, is that high end or what is it doing? >> listen, high end real estate is anything between, you know, up three, going up to the uber $20 million and then above 20 is a totally different game. the high end is actually our market is doing pretty well from one to 15 million. we have a ton of different sales.
our numbers are actually up. we're looking good. there is a lot of movement with buyers. where i'm beginning to see a problem is the uber high end, 20 and up. that's a real slowdown. >> i think a lot of people are scared because of everything that is happening with the stock market and internationally as well. there is a lot of uncertain a question mark about what to do. >> brazil, i would think dried up a lot. >> slowing down now. the foreign buyers are looking around. >> it slowed down. it slowed down but we also have a huge canadian market as well and we definitely have seen a decrease there as well, but, again, there is still a lot of opportunity. >> i know. real estate agents always have opportunities. austin, you were saying the foreign buyers in new york you think have dried up. >> they're not rushing to buy anything. they're waiting, they're waiting around, they're seeing what is
come on the market and what is going off the market. it is not what we were seeing, you know, a couple of years back where foreign buyers were just flooding the market, buying everything in sight. they have slowed down and we're beginning to see that. the foreign buyers, they do buy a lot. we see them buy a lot of higher price point. >> foreign buyers are interesting as far as a strengthening u.s. dollar over the last couple of years cut in their purchasing power, particularly in high end real estate. the new treasury rules about disclosure and naming the buyer for concerns about whether or not the money coming in is clean enough and the identities are well known enough. all of this is dampening demand. i'm talking about the luxury in new york. but this will have a ripple effect throughout manhattan. >> i bet. >> i think here in l.a. we're seeing a lot of the foreign buyers come here. they see the u.s. as a safe,
security place to park money, probably the safest for them. even with the china decline, seeing a bunch of chinese buyers come and invest so na is still helping los angeles high end market as well. >> lady and gentlemen, thank you so much. you can read ron insana's piece right now on powerlunch.cnbc.com. we're back in two minutes.
stocks had a fis rnice run the last six weeks or so. are we about to stall out? let's ask the trading nation team. kathy lean with bk asset management and eddie is editor of the crossing wall street blog. do you think the market bounce has run its course or more to run? >> so, tyler, i know last segment you talked about how there is so much to worry about in regards to high end new york real estate. i think there is a lot to be worried about with regards to the stock market. this morning we had personal spending as well as pc numbers come in soft, highlighting the challenges that the u.s. economy faces. i'm worried about spending. low spending equals low growth. and the problem is that all of
this is coming as a result of weak wages. all of which are big problems in the u.s. economy. this week we also have a number of federal reserve officials speaking, including yellen. and i think they're going to echo the less dovish comments we heard last week that hit stocks. corporate profitability is a big issue. corporate profitability from a financial institution perspective is being hurt by negative interest rates around the world. from a nonfinancial institution, there is a lot of currency head winds. if you look at it on a year over year basis, we could look at negative earnings for the first and second quarter. >> a whole load of fed speak. she's worried. how worried are you? >> i'm worried as well. a lot to be concerned about. the first thing is that the market had a pretty tremendous run over the past month. traders need to understand that markets don't normally go up 12% in one month. but what is really striking about the market recently is
that dramatic decline in volatility. today looks to be the tenth day in a row where the stock market closes up or down, less than 1%. before that, in this year, it had been happening more than every other day, and that was the fastest rate since the 1930s. the volatility has really dropped out of this market. i think it is very likely we're going to see a retest, revisit 2000, go below that. however, i think in the longer term, maybe not for traders, but i think in the longer term, the math still favors stocks. simply looking beyond bond yields and what you get from dividends and capital gains. >> we shall see. interesting couple of months, we appreciate you being with us. thanks again. you can find more trading nation at tradingnation.cnbc.com. as the s&p is up by about 3 points now. we'll be back in two minutes with more "power lunch."
a common mistake that some investors make is searching for stocks with the highest dividend yield. this can be a dangerous strategy because high dividend yield could mean the stock prices come down sharply or it may mean that the dividend is at risk of being cut. so before you reach for yield, be sure the stock is also fundamentally sound.
i am a technological breakthrough. this morning i read over 4000 articles on leukemia. in less than a second. (speaking japanese) i can understand euphemisms, idiosyncrasy and complex metaphors. i know every detail of every public quarterly report in the last 20 years. and i'm just getting warmed up. hello. my name is watson. together we can outthink the limits of what's possible. welcome to the cognitive era.
welcome back to "power lunch." we're following this still developing story out of houston. that is the marathon oil building in houston. and what has happened here, guys there are two workers who were working on the building itself, not necessarily apparently washing windows, when an electrical failure occurred to their basket and so they were not able to move the basket up or down. that is the 21st floor where you see the firefighters there hanging out. they're going to put the ladder down which they just have and a lot of this is according to jay evans for the houston fire department. and they're going to get these guys to safety by having them climb up. the pio officer says no one is in danger. i don't know, i might argue
about that, if i was suspended 20 floors up. they're hooking on what they call the lifeline, the safety line and they're going to -- according to the pio officer have them climb up the ladder. so this is not a good way to start your week in any way, shape or form. >> i agree with you there. not in danger would be a matter of opinion. and spoken by someone who is not in that basket. >> exactly. >> that is exactly right. we're going to keep you posted. they're on the verge of hoisting them up through the 21st floor window. we'll watch it for you guys. other stories we're following as well at this hour. and we start out west in california. california's governor jerry brown says a landmark deal has been reached to raise that state's minimum wage. the l.a. times reported lawmakers and union leaders have agreed to raise the minimum wage to $15 an hour over a six-year period. jane wells will have more from l.a. in just a few minutes on
that story. muslims in brussels holding a rally outside the metro train station that was bombed last week to show solidarity with victim of the terrorist attack. the group walked toward the station carrying balloons in the colors of the belgian flag and banners calling for peace. three help a tack helicopters leaving the air base in syria for russia, earlier this month, russian president putin ordered the bulk of the russian military contingent in syria be pulled out saying moscow had achieved most of its objectives. a fierce storm packing 100-mile-per-hour winds battering large parts of england over the weekend. in london, people woke up to streets strewn with debris. the gusts left some buildings badly damaged and caused dozens of flight cancellations and left thousands of people without power. that's the news update this hour. we'll watch the situation for you, tigy down in houston. hopefully they can get the workers out of the basket and into the building safely.
>> thank you, sue. the dow is up about 10% since february 11th. that's the so-called diamond bottom when jamie diamond of jpmorgan chase bought shares with his own cash. with the market surging, that much in six weeks, are we due now for a pullback? dom chu looking at caution signs for the market. these are dinged up caution signs. >> they are dinged up. steve liesman making fun. the markets go up and go down. we know this. there are reasons why some traders and investors are saying maybe we could do for a pause here, has to do with warning signs. too many to put up on our wall here. but a handful of them that you our viewers resonated with and what not are here up on the wall now. first of all, we're almost at earnings season yet again, strong dollar always plays in that conversation. has over the past few years. remember those foreign profits are much harder, more expensive to translate into profits here in the u.s., if we have a strong dollar.
commodity weakness, associated with the strong dollar, oil prices falling, gold is falling what does that say about those parts of the economy or with the energy sector overall. high yield bonds. people said this as well. are we seeing signs they were on a huge run higher off low levels, but are they rolling over? the utility stocks, the best performing sector in the s&p 500, why would you buy utility stocks if you're bullish on the overall economy in the stock market. that's another reason for concern. low trading volumes overall, nobody is really trafficking in these kinds of stocks. if you look at some overall warning signs, just a handful of them, interesting to note, the s&p 500 spider etf tracks the s&p 500, traded 36 million shares so far today. hour and a half left to go, it normally trades 147 million normal day. >> where have all the traders gone. >> the kingston trio. >> right, right. >> stick around, we'll dig a little deeper here in our wall of worry with all the caution signals.
time to hold steady or get out while you're ahead. let's bring in brian kelly of brian kelly capital and tim seymour of triagen. let me begin with you. are you concerned. is this time to put more money to work in the market or a time to maybe reap some profits where you say we're back up to where i began the year, up 10%. let me get out of here. >> so i wake up in the morning concerned. so that's my predisposition. particularly in these markets. but i think at these levels, this is not a place to start putting money to work. dom just mentioned four or five warning signs, also seeing corporate profits fall from multiple quarters. we also have auto sales falling. we had a good housing number this morning, but it -- last week wasn't that great. things may have stalled out there. it all depends on your investment. time frame. what you're looking to do. but if you have profits from 2008 up to here, there is no
reason why you shouldn't be taking some of those profits. and particularly if you look to retire at some point in the future. >> how about you, tim? the volatility is down. as dom pointed out, trading in one of the big etfs very quiet. is it too quiet for your comfort? >> supposed to be quiet the day after easter when half the world is closed and you go into earnings season, have a quarter end where there is no questioning we have come off of incredibly low sentiment to sentiment where just judged by the vix or volatility indicators, the market is not anticipating as much out there. yellen speaks tomorrow. people aren't expecting anything out of april, but the fed will try to tell you it is still alive. but markets think it is absolutely dead. you get anything north of that, you have a chance. but brian's concept is the world is really not that great a place. my view is that i think putting -- staying in cash or putting money into cash right now is something that is also kind of dangerous. doesn't mean you have to grab risk here and, in fact, more just the market is not going to
feed you and serve up a lehman style event. so i think it is very difficult to time this market. i agree with brian on corporate profits, i agree with all of the walls of worry out there. but trying to be too cute in here is challenging. >> stay with us. the markets are also looking ahead to fed chair, as you mentioned, tim, chair yellen and the jobs report this week, steve liesman spent some time looking at that. >> i'm not criticizing the science, a sign of the need for infrastructure spending in this country. let me show you some nice, clean -- >> let's look at the key economic variables for the week. first of all, very poor personal spending numbers, bigger vision downward in january. causing economists on the street, cnbc rapid update, falling .5%. half a point is a lot to give up. we're tracking under 1% for the
first quarter gdp here based on those revisions to january consumer spending. february came in pretty lackluster as well. the yellen speech tomorrow, a bunch of her committee members say april. yellen kind of indicated beyond april, we'll see what she says about the gdp numbers and also her take on the jobs numbers which are coming out on friday. again, looking for strong jobs. 213,000 average. that's off 142 in february. unemployment rate below 5%, 4.9%. a dichotomy going on here. we have this expectation, hopefully reality of a strong jobs report and very weak gdp. when i have the conflict like that, he sides with the jobs numbers. not the gdp numbers. >> steve, thank you very much. stay with us. let's bring back brian kelly and tim seymour to get your reactions. what are you going to be watching most closely this week, brian? >> i think it is the yellen speech. we have the fed meeting which i took yellen as being quite
dovish. i think the market did too. we saw the dollar fall, we saw dovish signals out there. within the last weekend, 48 hour period, four different fed governors came out and said, hey, you know what, april is back on the table, we might be hiking rates. i want to hear what yellen has to say, whether she walks back some of her dovishness or not. if i look at the numbers that steve put up, low jobless claims, low jobs -- sorry, low unemployment, and a basically flattish to 2% cpi at the fed's numbers and if i'm purely looking at that, there is no reason why april shouldn't be back on the table. >> tim and to you, steve. has all this transparency we seem to be lauding generally, everybody in favor of transparency, is the transparency confusing things on the fed, from the fed? >> you have many camps within the fed and voting and nonvoting. it is not bad the fed is telling
a tale. a lot of different people have a lot of different views and the reality is right now we think janet yellen is at least on the side of the doves, even though a couple of her allies shall we say have in the last few days, if you pointed out, been a little more hawkish. it is about the dollar here. and i think it is all about perceptions of china, china pmi out thursday night. it is a very, very big week as we go into quarter end when things had been so quiet. i think ultimately janet yellen tomorrow is going to keep alive the concept that the fed is data dependent and that although april is not when they're going to go, that they will continue to watch conditions. >> tim, how do you depend on the data when the data is pretty undependable in the errors in it and also when they disagree? you have 0.9% growth number and 200,000, what i know is that my scattered charts when i look at gdp over jobs, you have jobs numbers that suggest 3% gdp and gdp numbers that suggest flat jobs. >> and you have industrial
pressure which is probably leading them both evenlower. the fed is looking also at core inflation, which i think they can probably say there is various elements in that that are transitory. i'm just telling you the big picture of what i've been listening to from the fed for the last six years, especially in the yellen fed is that they're giving themselves every out to do whatever they want to do. and right now the data is not giving them enough reason to go. the rest of the world is part of what they can fall back on. they did that last september. the rest of the world looks better to me than it has. >> i'll put two more signs up on my wall. one that says fed confusion, and one that says economic data confusion as warning signs. >> i think they're very related in the sense that when you have the data, that is confusing, it confuses the fed and the -- i think what tim is saying is probably right in the sense that the fed will side in a more dovish way until the signs are very clear. i believe in the yellen fed, if they're going to make a mistake, toward the dovish side.
>> we have to leave it. steve, dom, tim and brian, thank you very much. california raising the minimum wage 15 bucks an hour over the next few years. what impact will it have on the economy? will it hurt small business owners? we will debate the risks and rewards after this. are? that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, they could save you in out-of-pocket medical costs. call today to request a free decision guide. with these types of plans, you'll be able to visit any doctor or hospital that accepts medicare patients... plus, there are no networks, and virtually no referrals needed. join the millions who have already enrolled in the only medicare supplement insurance plans endorsed by aarp... and provided by
unitedhealthcare insurance company, which has over 30 years of experience behind it. with all the good years ahead, look for the experience and commitment to go the distance with you. call now to request your free decision guide. we believe in the power of active management. anagement, we actively manage with expertise and conviction. so you can invest with more certainty. mfs. that's the power of active management. this just got interesting. why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache.
to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card
welcome back to "power lunch." pandora shares tanking 11%. the music streaming service announcing that its founder is coming back as ceo. shares of cal-maine foods are soaring 8%. higher egg prices help to beat profit estimates. revenue missing the mark. today's gains pushing the stock up 17% this year. avon surging 8%, naming a former fedex executive to its board of directors. over to dom chu with a market flash. >> affymetrix falling, having received an offer. now the board is rejecting this higher proposal saying there is
too much risk in doing a deal with this group. it will stick with the deal with thermofisher scientific. shares off 5%. we'll watch this pending merger very closely. back over to you. the fight over minimum wage. california raising the stakes and what does it mean for businesses there? jane wells is in studio city for us. jane? >> michelle, it is a 50% rise in the minimum wage, thousands of dollars more on the pockets of californians, individually. those are the pros. here are the cons. i'll explain when we come back.
but do you consistently get it? you do with comcast business. it's reliable. just like kung pao fish. thank you, ping. reliably fast internet starts at $59.95 a month. comcast business. built for business. california is set to increase the minh wum waimum wa raising it to $15 an hour. jane wells is live with the fallout. jane? >> michelle, minimum wage here already jumped a dollar an hour in january to about 10 bucks. we're here on ventura boulevard. go ahead. it is beautiful out here. great day for a walk. and that's one reason i'm told sources say this restaurant finally reached a tipping point and closed its doors. now this new 50% increase begins next year through 2022. businesses with fewer than 25
employees have an extra year. the governor is going to announce all this in about 45 minutes. the legislature still has to consider and vote on it, but it will probably pass. and here's why. it avoids a ballot measure on the november measure on the november ballot which have gotten to $15 sooner and was leading in the polls. also this new deal gives the governor the ability to stop wage increases and recession. the workers will also now get three days paid sick leave but even at $15 an hour. a 40-hour workweek would not cover the average rent for a two bedroom place in los angeles. even with $15, still the l.a. times says uc berkeley says california's 5 million lo paid workers constitute 38% and earn $4,000 a month. the hike would reduce gdp and jobs just in los angeles by one to two tenths of a percent.
i talked to one owner of a chain of restaurants and her net margins are 5 to 7% and more wage hikes coming, doing things like using ipads for ordering and outsourcing the phone orders and more online ordering to try to reduce her labor cost. guys? >> fewer employees basically is what she's doing? >> reporter: fewer employees but making more, higher tax revenue and lower tax base -- >> thanks, jane. california homes and nearly 1 million restaurants brings over 70 billion in annual sales. ceo of the california restaurant association, leading voice for restaurant professionals in the state thinks it's a recipe for disaster and andy green, with the center for american progress, a progressive think tank and believes it's an important step ford to getting americans to a living wage. why do you think this is so problematic? >> we've already seen the impacts of the one dollar
increase that just went up this january. california has one of highest minimum wages in the country. and we're seeing just like was earlier reported, businesses are suffering the consequences, when you're talking about 5 more dollars, that assures us from 2014 to 2021, a minimum wage increase every year. we expect more of what we've seen with the 10 dollar -- >> have we seen restaurant closures. quantify for me. tell me what has happened and what do you think is going to happen? >> there's a laboratory right now, if you look at oakland and bay area, faces of 15, they are kron keling the impacts they are having on small businesses and it's dry cleaners and grocery stores and businesses run by family owned operations -- >> what's happening to them? are they closing or getting ready --? >> they are firing people, they are reducing workforce.
the restaurant industry you're absolutely seeing restaurants adapting technology at the quicker clip and seeing entry level jobs going away. that's the tragedy of it all. restaurants are really the number one employer for many first time workers. $15 an hour ks you're going to see many of these unexperienced workers being priced out of the market. >> andy, it's your turn. >> well, the actual facts are last 30 years the minimum wage has been raised 91 times in state localities and in the vast majority of times, unemployment has gone down. the reality is when minimum wage goes up, workers get paid better. everyone feels better when they go -- >> we've got breaking news. hold on one second. sue herrera is standing by. >> thank you very much. tler multiple reports from various news sources out of washington, d.c. that shots have been fired near the capital.
it may be the capitol visitors center. nbc is working to confirm that. as you can see from live pictures, there is a police presence there. luke russert of nbc news tweeting out that the shelter in place order just went over the pa system in the capitol. he says a lot of police activity is near the visitor center. multiple reports of shots fired at the capitol or near the capitol center. basically this is the message that was just sent to house members, capitol police are locking down the complex due to a potential security threat. no one will be allowed to enter or exit any buildings. shelter under place, you may move about within the buildings or underground between buildings but if you are outside seek cover. so what we know at this point from nbc's luke russert and various other news organizations is that there have been shots
reported fired at or around the u.s. capitol's visitor's center. we're going to turn it back to you guys. that is the live picture, we'll continue to monitor it and once again luke russert saying the shelter in place order just went over the pa complex. back to you. >> our nbc bureau is very close -- >> they are on their way. >> on the senate side of, which is i guess north side of the capitol. michelle, i know you know, that neighborhood usually has a lot more pedestrian traffic than we're seeing there. people have been -- >> tourists obviously go to that area because of the location of the capitol. >> even though congress is not in session this week but -- >> the white house has also been locked dound according to ap. associated press says both congress and white house are on lockdown after of reports of shots fired on capitol hill. >> the world on high alert in the wake of what happened in
brussels, heightened sensitivity to anything so shots fired there in general are going to be a cause for concern and now they take even more precautions. >> we'll monitor the situation. eamon javers is on the way. it should take a couple of seconds. they are locking down the entire capitol complex, the white house is on lockdown. no surprise there i think to michelle's point just a few moments ago that world tensions are heightened to say the least the visitor situation you referred to is a relatively new thing built underground on the east side of of the capitol. you access it going down -- really underneath the capitol plaza. and it is a very large and beautiful museum and film center where you can -- where people
go. that becomes the visitor's classic way into the capitol if you're going on a tour and going into the main building, rotunda if you're so lucky to get tickets to go into one of the chambers. >> impossible to know what's happening with breaking news, there's some kind of ems truck here, looks like someone went inside. it's impossible to know if this is related to shots fired but there are live cameras everywhere and police presence from the live feeds we're getting in, inkredsably pervasive and heavily armed officers throughout the area here. >> keep in mind, there was an incident a number of years ago that actually our hampton peerson covered where there was a shooting right at the capitol visitor's center security guard was shot at that point. so this area unfortunately is no stranger to that type of violence, they've locked dourn the capitol, entire complex, white house, there's the police presence. the streets are also blocked by
emergency vehicles. >> the capitol has its own police force. u.s. capitol police work in concert with metropolitan police in washington. the capitol complex which is -- i don't know whether it's two square miles but it includes three house office buildings, three senate office buildings and main capitol building itself, that visitor center. they are woven together by literally miles of underground pedestrian and light tram tunnels. to move beneath the service and between buildings easily. i'm sure that would be an area of high security right now as we see an ambulance backing up there. >> it is interesting the shelter in place order that was put into effect just a few moments ago does say in the second graph here, you may move about within the buildings and that underground complex that you're
mentioning that tunnels, it says if you're underground between buildings, you may move around. if you're outside to seek cover -- zpl it is not without precedent to see attacks on members of a legislature parliament, you have to go back to shootings in ottawa back in 2014 that were so dramatic and painful to know that this would be an area that if god forbid something were to happen, this would be thought about if you're a terrorist who's trying to make an impact of some sort. >> right now according to associated press, the affected area is now the capitol visitor's center but out of an abundance of caution they are closing down the entire capitol but they believe whatever incident took place and multiple news agencies of shots fired. it seems to be focused on the capitol and the advice tore's center there.
>> this is coming just an hour before we're going to close the markets here. bill and kelly standing here. are you seeing any market impact? >> people getting nervous what this means. >> really, how it usually works, markets responded before we had word about it -- i don't know if we're going to put up the chart. the dow began to fall before we even heard the headlines about this. it was up 63 points and now up just 13 points and had been losing altitude. yes, we did see some market response although it is a very quiet day. just as the senate and house are out of congress this week, out of washington, it's like the stock market is the same thing too, very, very quiet day to start this week after of the holiday -- >> keep in mind, guys, this is a very heavy tourist week for washington, d.c.